Edgar Filing: ESCALON MEDICAL CORP

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def14a

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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o		Soliciting Material Pursuant to §240.14a-12

Escalon Medical Corp.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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		Escalon Medical Corp. 565 East Swedesford Road, Suite 200 Wayne, PA 19087 Tel.610-688-6830 • Fax. 610-688-3641

Notice of 2007 Annual Meeting of Shareholders
To Be Held December 28, 2007

To the Shareholders of Escalon Medical Corp.:

The annual meeting of shareholders of Escalon Medical Corp. will be held at 9:00 a.m., local time, on December 28, 2007, at the offices of Duane Morris LLP, 30 South 17th Street, 12th Floor, Philadelphia, Pennsylvania. At our annual meeting, our shareholders will act on the following matters:


	1.	Election of two Class II directors, each for a term of three years and until their respective successors have been elected to serve; and

	2.	Any other matters that properly come before our annual meeting.

All shareholders of record as of the close of business on November 23, 2007 are entitled to vote at our annual meeting.

Our 2007 Annual Report is being mailed to shareholders together with this Notice.

It is important that your shares be voted at our annual meeting. Please complete, sign and return the enclosed proxy card in the envelope provided whether or not you expect to attend our annual meeting in person.

By Order of the Board of Directors,

Richard J. DePiano

Chairman and Chief Executive Officer

November 30, 2007

Wayne, Pennsylvania

ESCALON MEDICAL CORP.

PROXY STATEMENT

This proxy statement contains information relating to the annual meeting of shareholders of Escalon Medical Corp. to be held on December 28, 2007, at the offices of Duane Morris LLP, 30 South 17th Street, 12th Floor, Philadelphia, Pennsylvania at 9:00 a.m., local time, and at any adjournment, postponement or continuation of the annual meeting. This proxy statement and the accompanying proxy are first being mailed to shareholders on or about November 30, 2007. Unless the context indicates otherwise, all references in this proxy statement to “we,” “us,” “our” “Escalon” or the “Company” mean Escalon Medical Corp. and its subsidiaries.

CONTENTS


	Page

ABOUT OUR ANNUAL MEETING		1
What is the purpose of our annual meeting?		1
VOTING		1
Who is entitled to vote at our meeting?		1
What are the voting rights of our shareholders?		1
Who can attend our annual meeting?		1
What constitutes a quorum?		1
How do I vote?		1
May I change my vote after I return my proxy card?		1
What are our Board’s recommendations?		2
What vote is required to approve each matter?		2
Who will pay the costs of soliciting proxies on behalf of our Board of Directors?		2
STOCK OWNERSHIP		3
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE		3
ELECTION OF DIRECTORS		4
ITEM 1 — ELECTION OF CLASS II DIRECTORS		4
Introduction		4
Governance and Nominating Procedures		4
Actions Taken by Our Governance and Nominating Committee		4
Candidates for Election		4
Directors Continuing in Office		5
CORPORATE GOVERNANCE		6
Our Board of Directors and Its Committees		6
Audit Committee		6
Governance and Nominating Committee		7
Compensation Committee		7
Director — Shareholder Communication		7
EXECUTIVE OFFICERS OF THE COMPANY		7
EXECUTIVE COMPENSATION		8
Compensation Discussion and Analysis		8
Introduction		8
Our Compensation Philosophy and Objectives		8
The Compensation of Our Officers		9
The Operation of Our Compensation Process		9
Tax Matter		10
Executive Compensation Tables		10


	Page

Discussion of Elements of Compensation		11
Employment Agreements		12
Outstanding Equity Awards at Fiscal Year-End		13
Equity Compensation Plan Information		13
Report of Our Compensation Committee		14
COMPENSATION OF DIRECTORS		14
Director Compensation Table		14
Related Person Transactions		14
AUDIT AND NON-AUDIT FEES		15
Report of the Audit Committee		16
SHAREHOLDER PROPOSALS		16
OTHER MATTERS		17

ABOUT OUR ANNUAL MEETING

What is the purpose of our annual meeting?

At our annual meeting, shareholders will act upon the matters outlined in the notice of meeting on the cover page of this proxy statement, including the election of two Class II directors and any other matters that properly come before our annual meeting. In addition, our management will report on our performance during fiscal 2007 and respond to appropriate questions from shareholders.

VOTING

Who is entitled to vote at our meeting?

Holders of common stock of record at the close of business on the record date, November 23, 2007, are entitled to receive notice of and to vote at our annual meeting, and any adjournment, postponement or continuation of our annual meeting.

What are the voting rights of our shareholders?

As of the record date, 6,344,657 shares of common stock were outstanding, each of which is entitled to one vote with respect to each matter to be voted on at our annual meeting.

Who can attend our annual meeting?

All shareholders as of the record date, or their duly appointed proxies, may attend our annual meeting. Even if you currently plan to attend our annual meeting, we recommend that you also submit your proxy as described below so that your vote will be counted if you later decide not to attend our annual meeting.

If you hold your shares in “street name” (that is, through a broker or other nominee), you will need to bring a copy of a brokerage statement reflecting your stock ownership as of the record date and check in at the registration desk at our annual meeting.

What constitutes a quorum?

The presence at our annual meeting, in person or by proxy, of the holders of a majority of the shares of our common stock outstanding on the record date will constitute a quorum, permitting the conduct of business at our annual meeting. Proxies received but marked as abstentions and broker non-votes will be included in the calculation of the number of shares present at our annual meeting.

How do I vote?

If you or your duly authorized attorney-in-fact complete, properly sign and return the accompanying proxy card to us, it will be voted as you direct. If you are a registered shareholder and attend our annual meeting, you may deliver your completed proxy card in person. “Street name” shareholders who wish to vote at our annual meeting will need to obtain a signed proxy from the institution that holds their shares.

May I change my vote after I return my proxy card?

Yes. Even after you have submitted your proxy, you may change your vote at any time before the proxy is exercised by filing with our Secretary either a notice of revocation or a duly executed proxy bearing a later date. The powers of the proxy holders will be revoked if you attend our annual meeting in person and request that your proxy be revoked, although attendance at our annual meeting will not by itself revoke a previously granted proxy.

What are our Board’s recommendations?

Unless you give other instructions on your proxy card, the persons named as proxy holders on the proxy card will vote in accordance with the recommendations of our Board of Directors. Our Board of Directors recommends a vote:


	•	FOR election of our nominees for Class II directors (see pages 4 through 7).

What vote is required to approve each matter?

Election of Class II Directors. The two persons receiving the highest number of “FOR” votes cast by the holders of our common stock for election as Class II directors will be elected. A properly executed proxy marked “WITHHOLD AUTHORITY” with respect to the election of one or more directors will not be voted with respect to the director or directors indicated, although the proxy will be counted for purposes of determining whether a quorum is present. Abstentions and shares held by brokers or nominees as to which voting instructions have not been received from the beneficial owner of or persons otherwise entitled to vote the shares and as to which the broker or nominee does not have discretionary voting power, i.e., broker non-votes, will not be taken into account in determining the outcome of the election. We do not permit cumulative voting in the election of directors.

Other Matters. The affirmative vote of a majority of the votes cast by the holders of our common stock on the proposal will be required to approve any other matter that properly comes before our annual meeting. Abstentions and broker non-votes do not constitute votes cast and therefore will not affect the outcome of the vote.

If you sign your proxy card or broker voting instruction card with no further instructions, your shares will be voted in accordance with the recommendations of our Board, i.e., FOR the election of our nominees for Class II directors.

Who will pay the costs of soliciting proxies on behalf of our Board of Directors?

We are making this solicitation and will pay the cost of soliciting proxies on behalf of our Board of Directors, including expenses of preparing and mailing this proxy statement. In addition to mailing these proxy materials, the solicitation of proxies or votes may be made in person or by telephone or telegram by our regular officers and employees, none of whom will receive special compensation for such services. Upon request, we will also reimburse brokers, nominees, fiduciaries and custodians and persons holding shares in their names or in the names of nominees for their reasonable expenses in sending proxies and proxy material to beneficial owners.

STOCK OWNERSHIP

The following table shows the amount and percentage of our outstanding common stock beneficially owned by each director, each nominee for director, each executive officer named in the Summary Compensation Table, persons or groups who beneficially own more than 5% of our outstanding common stock and all of our executive officers and directors as a group as of November 23, 2007.

Beneficial Ownership Table


						Amount of
	Amount of					Beneficial
	Beneficial					Ownership
Name and Address of 5% Beneficial	Ownership of					of Shares		Amount of		Aggregate
Owners and Officers,	Outstanding		Percent			Underlying		Aggregate Beneficial		Percent of
Directors and Group	Shares(1)		of Class			Options		Ownership		Class

Richard J. DePiano		144,278		2.3	%		236,897		381,175		5.9	%
Fidelity Management & Research Co.		585,100		9.2	%		—		585,100		9.2	%
Barclays Global Investors, N.A.		383,072		6.0	%		—		383,072		6.0	%
Richard J. DePiano, Jr.		206		—			60,367		60,573		*
Robert O’Connor		—		—			60,000		60,000		*
Jay L. Federman, MD		12,072		0.2	%		45,000		57,072		*
William L. Kwan		—		—			50,000		50,000		*
Fred G. Choate		—		—			10,000		10,000		*
Anthony J. Coppola		—		—			25,000		25,000		*
Lisa A. Napolitano		—		—			22,000		22,000		*
All Directors and executive officers as a group (8 persons)		144,484		2.3	%		557,264		701,748		11.0	%


*		Less than 1%

Information furnished by each individual named. This table includes shares that are owned jointly, in whole or in part, with the person’s spouse, or individually by his or her spouse. No shares held by directors or named executive officers are pledged.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) requires that our officers and directors, as well as persons who own 10% or more of a class of our equity securities, file reports of their ownership of our securities, as well as statements of changes in such ownership, with us and the Securities Exchange Commission (the “SEC”). Based upon written representations received by us from our officers, directors and 10% or greater shareholders, and our review of the statements of beneficial ownership changes filed with us by our officers, directors and 10% or greater shareholders during fiscal 2007, we believe all such filings required during the fiscal year 2007 were made on a timely basis.

ELECTION OF DIRECTORS

ITEM 1 — ELECTION OF CLASS II DIRECTORS

Introduction

The election of our directors by our shareholders is governed by the Pennsylvania Business Corporation Law and our Bylaws. The following discussion summarizes these provisions and describes the process our Governance and Nominating Committee will follow in connection with the nomination of candidates for election as directors by the holders of our common stock.

Governance and Nominating Procedures

Our Governance and Nominating Committee is responsible for recommending to the Board of Directors candidates to stand for election to the Board of Directors at the annual meeting. Our Governance and Nominating Committee will also consider director candidates recommended by shareholders in accordance with the advance notice procedures in Section 2.3 of our Bylaws. These procedures are described under “Shareholder Proposals” in this proxy statement. The Governance and Nominating Committee may also consider director candidates proposed by our management. We have not utilized third-party executive search firms to identify candidates for director.

With the exception of applicable rules of the SEC and the Nasdaq Stock Market^SM (“Nasdaq”), our Governance and Nominating Committee does not have any specific, minimum qualifications for candidates for election to our Board of Directors, and our Governance and Nominating Committee may take into account such factors as it deems appropriate. Our Governance and Nominating Committee examines the specific attributes of candidates for election to our Board of Directors and also considers the judgment, skill, diversity, business experience, the interplay of the candidate’s experience with the experience of the other members of our Board of Directors and the extent to which the candidate would contribute to the overall effectiveness of our Board of Directors.

Our Governance and Nominating Committee will utilize the following process in identifying and evaluating candidates for election as members of our Board of Directors:


	•	Evaluation of the performance and qualifications of the members of our Board of Directors whose term of office will expire at the forthcoming annual meeting of shareholders and determination of whether they should be nominated for re-election.

	•	Consideration of the suitability of the candidates for election, including incumbent directors.

	•	Review of the qualifications of any candidates proposed by shareholders in accordance with our Bylaws, candidates proposed by management and candidates proposed by individual members of our Board of Directors.

	•	After such review and consideration, propose to the Board of Directors a slate of candidates for election at the forthcoming annual meeting of shareholders.

Actions Taken by Our Governance and Nominating Committee

Our Governance and Nominating Committee met once this year, but our entire Board of Directors performed the functions of the Governance and Nominating Committee with respect to the nominating of candidates for election at the 2007 Annual Meeting. The Board of Directors met on September 19, 2007 for the purpose of nominating candidates for election as directors by our shareholders at our 2007 annual meeting of shareholders and approved the nomination of the persons named below.

Candidates for Election

Our Board of Directors currently consists of six members, four of whom are considered independent for purposes of the applicable Nasdaq rules. The current independent directors are Anthony J. Coppola, Lisa A. Napolitano, Fred G. Choate and William L. G. Kwan. Each director is elected for a three-year term and until his/her

successor has been duly elected. The current three-year terms of our directors expire in the years 2007, 2008 and 2009, respectively.

Two Class II directors are to be elected at our annual meeting. Unless otherwise instructed, the proxies solicited by our Board of Directors will be voted for the election of the nominees named below. The two Class II nominees are currently directors of the Company.

If any of the nominees becomes unavailable for any reason, the proxies intend to vote for a substitute nominee designated by our Board of Directors. Our Board of Directors has no reason to believe the nominees named will be unable to serve if elected. Any vacancy occurring on our Board of Directors for any reason may be filled by a majority vote of our directors then in office until the expiration of the term of the class of directors in which the vacancy exists.

The names of the nominees for Class II directors and the Class I directors and Class III directors who will continue in office after our annual meeting until the expiration of their respective terms, together with certain information regarding them, are as follows:

Nominees For

Class II

Director

Year Term

Principal Occupation During Past Five

Name of Director

Since

Will Expire

Age

Years and Certain Directorships

Lisa A. Napolitano

2003

2010*

Tax Manager, Global Tax Management, Inc., a provider of compliance support services for both federal and state taxes, since 1998. Ms. Napolitano is a Certified Public Accountant in Pennsylvania.

Fred G. Choate

2005

2010*

Managing Member of Atlantic Capital Funding LLC, a venture capital fund, from 2003 to present, Managing Member of Atlantic Capital Management LLC, a venture capital fund, from 2004 to present; Baltic-American Enterprise Fund, a venture capital fund, Chief Investment Officer from 2003 to present; Managing Member of Greater Philadelphia Venture Capital Corp, a venture capital fund, from 1992 to present. Mr. Choate has been a director of Parke Bank since 2003. Mr. Choate was formerly a director of Escalon Medical from 1998 to 2003.


*		If elected at the Annual Meeting.

Directors Continuing in Office

Name of Director

Director

Year Term

Principal Occupation During Past Five

Class I

Since

Will Expire

Age

Years and Certain Directorships

William L.G. Kwan

1999

2009

Retired; Vice President of Business Development of Alcon Laboratories, Inc. a medical products company, from October 1996 to 1999, and Vice President of International Surgical Instruments from November 1989 to October 1999.

Anthony J. Coppola

2000

2009

Principal and operator of The Historic Town of Smithville, Inc., a real estate and commercial property company from 1988 to present; Retired Division President of SKF Industries, a manufacturing company, from 1963 to 1986.

Name of Director

Director

Year Term

Principal Occupation During Past Five

Class III

Since

Will Expire

Age

Years and Certain Directorships

Richard J. DePiano

1996

2008

Chairman and CEO of Escalon Medical Corp. since March 1997. CEO of the Sandhurst Company, L.P. and Managing Director of the Sandhurst Venture Fund since 1986; Chairman of the Board of Directors of PhotoMedex, Inc.

Jay L. Federman, M.D.

1996

2008

Jay Federman, M.D. is an ophthalmologist subspecializing in the management of vitreo-retinal diseases with Associated Retinal Consultants. He is currently an Attending Surgeon at Wills Eye Institute and a Professor of Ophthalmology at Jefferson Medical College. His Directorships include the Research Department of Wills Eye Hospital from 1987 to 1995, Chief of the Department Ophthalmology of the Medical College of PA from 1994 to 2004, Co-Director of the Retina Service of Wills Eye Hospital from 1991 to 1999 and a Director of the Vitreo-Retinal Research Foundation of Philadelphia. He is a member of the American Academy of Ophthalmology, American College of Surgeons, American Ophthalmological Society, Association of Research in Vision and Ophthalmology, Club Jules Gonin, Macula Society, and the Retina and Vitreous Societies.

CORPORATE GOVERNANCE

The SEC and Nasdaq have adopted regulations and listing requirements that relate to our corporate governance. Our Board of Directors has adopted standards and practices in order to comply with those regulations that apply to us. We have has adopted a Code of Ethics, which can be accessed on our web site at www.escalonmed.com. Our independent directors meet at regularly scheduled meetings at which only independent directors are present.

Our Board of Directors and Its Committees

Our Board of Directors met seven times in fiscal 2007. Our Board of Directors has an Executive Committee, an Audit Committee, a Governance and Nominating Committee and a Compensation Committee.

Audit Committee

Our Audit Committee consists of Anthony J. Coppola, William L.G. Kwan and Lisa A. Napolitano. The Committee met four times in fiscal 2007. Each member of the Audit Committee is independent within the meaning of the rules of Nasdaq and of the SEC. Consistent with the Sarbanes-Oxley Act of 2002 (“Sarbanes-Oxley”), the Audit Committee has responsibility for:


	•	the selection of our independent public accountants;

	•	reviewing the scope and results of the audit;

	•	reviewing related-party transactions; and

	•	reviewing the adequacy of our accounting, financial, internal and operating controls.

Our Audit Committee operates pursuant to a written charter, the full text of which is available on our website.

Governance and Nominating Committee

Our Governance and Nominating Committee consists of Anthony J. Coppola, Fred G. Choate and Lisa A. Napolitano. Each member of the Governance and Nominating Committee is independent within the meaning of the rules of Nasdaq and of the SEC. Our Governance and Nominating Committee has responsibility for:


	•	developing and recommending to the Board corporate governance guidelines, establishing procedures to ensure effective functioning of the Board;

	•	reviewing of director compensation;

	•	identifying individuals believed to be qualified to become members of our Board of Directors and to recommend to our Board of Directors nominees to stand for election as directors; and

	•	Identifying members of our Board of Directors qualified to serve on the various committees of our Board of Directors.

Our Governance and Nominating Committee operates pursuant to a written charter, the full text of which is available on our website.

Compensation Committee

Our Compensation Committee consists of Anthony J. Coppola, Fred G. Choate and Lisa A. Napolitano. The Committee met one time in fiscal 2007. Each member of the Compensation Committee is independent within the meaning of the rules of Nasdaq and of the SEC. Our Compensation Committee has responsibility for:


	•	the annual review and determination of the compensation of our executive officers;

	•	providing annual compensation recommendations to our Board of Directors for all of our officers;

	•	determining the employees who participate in our equity incentive plans and the provision of recommendations to our Board of Directors as to individual stock option grants and other awards; and

	•	the general oversight of our employee benefit plans.

Our Compensation Committee operates pursuant to a written charter, the full text of which is available on our website. Our Compensation Committee’s charter reflects these responsibilities, and the Compensation Committee and our Board of Directors reviews the charter annually.

Director — Shareholder Communications

Our shareholders may communicate with our Board of Directors through our Secretary. Shareholders who wish to communicate with any of our directors may do so by sending their communication in writing addressed to a particular director, or in the alternative, to “Non-management Directors” as a group, in care of our Secretary at our headquarters, 565 East Swedesford Road, Suite 200, Wayne, PA 19087. All such communications that are received by our Secretary will be promptly forwarded to the addressee or addressees set forth in the communication.

We actively encourage our directors to attend our annual meetings of shareholders because we believe director attendance at our annual meetings provides our shareholders with an opportunity to communicate with the members of our Board of Directors. All of our directors, with the exception of Mr. Kwan, attended our annual meeting of shareholders in 2006 and, with the exception of Mr. Kwan, intend to be in attendance at the 2007 annual meeting.

EXECUTIVE OFFICERS OF THE COMPANY

Our executive officers are as follows:

Mr. DePiano has been a director of the Company since February 1996 and has served as Chairman and Chief Executive Officer of the Company since March 1997. Mr. DePiano has been the Chief Executive Officer of the Sandhurst Company, L.P. and Managing Director of the Sandhurst Venture Fund since 1986. Mr. DePiano also serves Chairman of the Board of Directors of PhotoMedex, Inc.

Mr. DePiano, Jr. was appointed Chief Operating Officer and General Counsel of the Company December 28, 2006. Mr. DePiano, Jr. joined the Company in November of 2000 as Vice President Corporate and Legal Affairs. Prior to joining the Company, Mr. DePiano, Jr. worked with Forceno & Arangio, L.L.P., from September 1998 until November 2000 as a Senior Associate representing individual and business clients in various areas of the law including mergers and acquisitions, automotive dealership representation, family, small and emerging businesses, securities law, venture capital financing, consumer finance and general corporate and commercial matters. Prior to this Mr. DePiano, Jr. was in private law practice since 1992. He currently serves as President Elect and as a member of the Board of Directors of the Delaware Valley Corporate Counsel Association (“DELVACCA”). Mr. DePiano, Jr. also serves as the Chairman of the Nominations Committee, Chairman of the Law School Initiative Committee and member of the Pro-Bono Committee of DELVACCA. He also is Vice Chairman of the Board of Directors of the Montgomery County Industrial Development Authority and is also a member of the Pennsylvania Bar Association.

Mr. O’Connor was appointed Chief Financial Officer of the Company on June 30, 2006. Mr. O’Connor joined the Company from BDO Seidman, LLP where he served as a senior manager from 2004. His prior experience includes both public and private accounting roles as a manager at PricewaterhouseCoopers, LLP where he served in the middle market advisory services group from 1998 until 2000, and positions of controller and chief financial officer of Science Dynamics, a manufacturer of high tech telecom equipment, from 2000 until 2002 and Ianieri & Giampapa, LLC, a certified public accounting firm from 2002 until 2004. Mr. O’Connor holds an MBA from Rutgers University — Graduate School of Management and a B.S. from Kean University. He is a certified public accountant and a member of the American Institute of Certified Public Accountants (AICPA).

EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

Introduction

The Compensation Committee of our Board of Directors, or our Compensation Committee, oversees our compensation and policies, our compensation levels, including reviewing and approving equity awards to our executive officers, and reviews and recommends annually for approval by our Board of Directors all compensation decisions relating to our executive officers.

Our Compensation Committee believes that the primary objectives of our compensation programs for our executive officers are to:


	•	attract and retain talented and dedicated executive officers who contribute to our growth, development and profitability and to encourage them to remain with us for many years;

	•	motivate our executive officers to achieve our strategic business objectives and to reward them when they achieve those objectives; and

	•	provide long-term compensation to our executive officers that rewards our executive officers for sustained financial and operating performance and leadership excellence.

Our Compensation Philosophy and Objectives

The most significant component of the compensation policy administered by our Compensation Committee is that a substantial portion of the aggregate annual compensation of our named executive officers should be based on our annual financial results, our overall sales, growth and our profitability. Our Compensation Committee also evaluates the achievement of our other corporate objectives and the contribution of each named executive officer to those achievements.

We rely on our judgment in making compensation decisions after reviewing our performance and the performance of our executives based on financial and operational objectives. We do not retain the services of any compensation consultants. Two of our named executive officers, Richard DePiano, Sr. and Robert O’Connor, have employment, severance and change-of-control agreements. (See Employment Agreements below.)

For a number of years, we have maintained a cash incentive compensation program for our officers, including our named executive officers. The amount of the bonus is dependent upon several factors listed below including our financial results, sales growth and our profitability. Our Compensation Committee does not assign specific weights to these factors.

The Compensation of Our Officers

Our officers receive the following types of compensation:


	•	Base Salary. The base salaries of our officers, including our named executive officers, are established based on the scope of their responsibilities and the recommendation of our Chief Executive Officer to our Compensation Committee for other than his own compensation. Our Compensation Committee reviews the base salaries of our named executive officers annually, including our Chief Executive Officer, and adjusts those salaries annually after taking into account individual responsibilities, performance, length of service with us, current salary, experience and compensation history as well as our results of operations.

	•	Annual Cash Bonus. Our officers, including our named executive officers, receive annual cash bonuses based on our financial results, overall sales growth and profitability. The maximum aggregate amount available annually for our officers is determined by our Compensation Committee. Our Compensation Committee then recommends to our Board of Directors the percentage of the maximum amount to be allocated among our officers, including our named executive officers, on a discretionary basis. Our Chief Executive Officer submits recommended bonus allocations for our officers, including our named executive officers other than himself, to our Compensation Committee, which reviews his recommendations and then establishes the annual bonus allocations for our officers and reports its decisions to our Board of Directors. The annual cash bonuses approved by our Compensation Committee are paid in a single installment following the completion of a particular fiscal year.

	•	Long-Term Equity Incentives. We believe that we can maximize our long-term performance best when the performance of our officers is motivated by equity-based awards that provide value based on our long-term performance. We have designed our long-term equity compensation plans to provide all of the members of our management, including our named executive officers, with equity incentives to foster the alignment of the interests of our officers with the interests of our stockholders. Our equity-based compensation plans provide the principal method by which our officers can acquire ownership of our common stock. The primary form of equity compensation that we have historically awarded to our officers, including our named executive officers, is stock options. Our Compensation Committee receives preliminary recommendations for periodic stock option grants from our Chief Executive Officer for our officers other than himself. Our Compensation Committee then recommends stock option grants for all of our officers, including our Chief Executive Officer, for approval by our Board of Directors. We have stock option plans that authorize us to grant options to purchase shares of our common stock to our employees, officers and directors. We have consistently followed the practice of granting stock options at an exercise price of the closing price of our common stock on Nasdaq on the date of grant.

The Operation of Our Compensation Process

Our Compensation Committee recommends all compensation and equity awards to our executive officers for final discretionary action by our Board of Directors. Our Compensation Committee, in recommending the annual compensation of our officers, including our named executive officers, to be established by our Board of Directors, reviews the performance and compensation of our officers. In assessing the performance of our named executive officers in relation to the objectives established by our Board of Directors, our Compensation Committee reviews specific achievements associated with attainment of the objectives, the degree of difficulty of the objectives and the extent to which significant unforeseen obstacles or favorable circumstances affected their performance.

Our Compensation Committee recommends to our Board of Directors the base salaries, annual aggregate bonus amount and stock option grants to the members of our management. As part of its oversight of the compensation of our named executive officers, our Compensation Committee recommended the following compensation adjustments for 2007 for our named executive officers:


	•	increases in base salaries of our named executive officers in 2007 that averaged 2.7% which our Compensation Committee considered an adjustment consistent with published information about CPI increases in the United States in 2007;

	•	increases in individual bonus represented an increase which our Compensation Committee regarded as appropriate recognition of our named executives performance across a combination of qualitative and quantitative objectives during the performance period, and

	•	continued grants of stock options at exercise prices at which we would be prepared to sell our common stock in the event we were to determine to raise additional capital because our Compensation Committee believes that our history of stock option grants has in fact been successful in motivating our named executive officers to achieve superior performance.

Tax Matters

Section 162(m) of the Code generally does not allow us a deduction for federal income tax purposes to the extent that we pay annual compensation to any of our executive officers named in the Summary Compensation Table in this proxy statement that is in excess of $1 million. However, compensation paid to such an executive officer that is paid pursuant to a performance-based plan is generally not subject to the Section 162(m) limitation. Although our Compensation Committee is aware of the Section 162(m) limitation, our Compensation Committee believes that it is equally important to maintain flexibility and the competitive effectiveness of the compensation of our named executive officers. Our Compensation Committee may, therefore, from time to time, authorize compensation that is not deductible for federal income tax purposes if our Compensation Committee believes it is in our best interests and the best interests of our stockholders to do so.

Executive Compensation Tables

The following table shows the compensation paid during each of the three fiscal years ended June 30, 2007 for services rendered in all capacities to our Chief Executive Officer, our Chief Financial Officer and our other most highly compensated executive officer whose compensation exceeded $100,000 in the fiscal year ended June 30, 2007.

Summary Compensation Table


													Change in
													Pension
													Value and
													Nonqualified
											Non-Equity		Deferred
							Stock		Option		Incentive Plan		Compensation		All Other
Name and Principal Position	Year		Salary		Bonus		Awards		Awards		Compensation		Earnings		Compensation			Total

Richard J. DePiano		2007	$	317,700	$	250,000	$	—	$	23,207	$	—	$	—	$	9,200	(1)	$	590,907
Chairman and Chief Executive Officer
Richard J. DePiano, Jr.		2007	$	127,200	$	80,000	$	—	$	7,425	$	—	$	—	$	—		$	214,625
Chief Operating Officer and General Counsel
Robert M. O’Connor		2007	$	200,000	$	25,000	$	—	$	—	$	—	$	—	$	—		$	225,000
Chief Financial Officer


(1)		Includes payment of, (a) an automobile allowance and (b) insurance premiums paid for life insurance.

As of June 30, 2007, we granted the following stock options to the persons named in the Summary Compensation Table:

Grants of Plan-Based Awards


															All
															Other						Grant
															Stock		All Other				Date
															Awards:		Options				Fair
															Number		Awards:		Exercise		Value
															of		Number of		or Base		of Stock
															Shares		Securities		Price of		and
	Grant		Estimated Future Payouts Under Non-Equity Incentive Plan Awards						Estimated Future Payouts Under Non-Equity Incentive Plan Awards						of Stock		Underlying		Option		Option
Name	Date		Thresold		Target		Maximum		Thresold		Target		Maximum		or Units		Options		Awards		Awards

Richard J. DePiano		11/9/2006	$	—	$	—	$	—	$	—	$	—	$	—		—		25,000	$	2.65	$	61,886
Chairman and Chief Executive Officer
Richard J. DePiano, Jr.		11/9/2006	$	—	$	—	$	—	$	—	$	—	$	—		—		20,000	$	2.65	$	49,509
Chief Operating Officer and General Counsel
Robert M. O’Connor		2007	$	—	$	—	$	—	$	—	$	—	$	—		—		—	$	—	$	—
Chief Financial Officer


(1)		These options were granted under the Company’s 1999 Equity Incentive Plan and have a term of ten years, subject to earlier termination in certain events. See “Employment Agreements”.

Discussion of Elements of Compensation

Salary. Salaries for named executive officers are determined based on a variety of factors, including the executive’s scope of responsibilities. Salaries are reviewed for our named executive officers once each year, and may be adjusted after considering the factors listed below and the named executive officer’s performance.

Annual Cash Bonus. In fiscal year 2007, named executive officers had the opportunity to earn a cash bonus. Bonuses are provided to reward achieving business results against individual annual performance commitments and to deliver cash as part of an overall compensation package that is competitive in the marketplace.

The Compensation Committee determines bonuses in its discretion based on performance across a combination of qualitative and quantitative objectives during the performance period. Working with our Chief Executive Officer, each named executive officer establishes these objectives annually. The Chief Executive Officer establishes his goals in consultation with the Board. The goals used to determine bonuses vary for each executive based on his responsibilities and may include financial or strategic measures, including:


	•	revenue,

	•	profitability,

	•	innovation,

	•	product development and implementation,

	•	quality,

	•	customer satisfaction,

	•	customer acceptance,

	•	organizational and leadership,

	•	strategic planning and development,

	•	operations excellence, and

	•	efficiency and productivity.

For named executive officers other than the Chief Executive Officer, the Chief Executive Officer recommends individual bonus payments based on the executive’s performance against his goals for the year. The Compensation Committee considers the recommendations and makes a final decision on the bonus payments.

For Mr. DePiano, the Compensation Committee recommends a bonus payment to the independent members of the Board. In making this recommendation, the Compensation Committee considers the performance evaluation of Mr. DePiano. The Board considers the Committee’s recommendation and Mr. DePiano’s performance evaluation in determining the bonus for Mr. DePiano.

Employment Agreements

On May 12, 1998, the Company entered into an employment agreement with Richard J. DePiano as the Chairman and Chief Executive Officer of the Company. The initial term of the employment agreement commenced on May 12, 1998 and continued through June 30, 2001. The employment agreement renews on July 1 of each year for successive terms of three years unless either party notifies the other party at least 30 days prior to such date of the notifying party’s determination not to renew the agreement. The current base salary provided under the agreement, as adjusted for yearly cost of living adjustments, is $317,700 per year, and the agreement provides for additional incentive compensation in the form of a cash bonus to be paid by the Company to Mr. DePiano at the discretion of the Board of Directors. The agreement also provides for health and long-term disability insurance and other fringe benefits as well as an automobile allowance of $800 per month.

On June 23, 2005, the Company entered into a Supplemental Executive Retirement Benefit Agreement with Mr. DePiano. The agreement provides for the payment of supplemental retirement benefits to Mr. DePiano in the event of his termination of service Mr. DePiano with the Company under the following circumstances:


	•	If Mr. DePiano retires at age 65 or older, the Company is obligated to pay the executive $8,000 per month for life, with payments commencing the month after retirement. If Mr. DePiano were to die within a period of three years after such retirement, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to the covered executive and his beneficiaries in the aggregate.

	•	If Mr. DePiano dies before his retirement, while employed by the Company, the Company would be obligated to make 36 monthly payments to his beneficiaries of $8,000 per month commencing in the month after his death.

	•	If Mr. DePiano were to become permanently disabled while employed by the Company, the Company would be obligated to pay the executive $8,000 per month for life, with payments commencing the month after he suffers such disability. If Mr. DePiano were to die within three years after suffering such disability, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to the covered executive and his beneficiaries in the aggregate.

	•	If Mr. DePiano’s employment with the Company is terminated by the Company, prior to him attaining age 65 or if he terminates his employment with the Company for good reason, as defined in the agreement, the Company would be obligated to pay him $8,000 per month for life. If Mr. DePiano were to die within a period of three years after such termination, the Company would be obligated to continue making such payments until a minimum of 36 monthly payments have been made to him and his beneficiaries in the aggregate.

During the fourth quarter of fiscal 2005, we recorded as an expense in our Consolidated Statement of Income, $1,087,000, which represents the present value of the supplemental retirement benefits awarded.

As Chief Operating Officer and General Counsel, Mr. DePiano, Jr. received an annual salary of $127,300.

As Chief Financial Officer, Mr. O’Connor’s annual base salary is $200,000. Mr. O’Connor has been granted stock options to purchase 60,000 shares of the Company’s common stock, which are exercisable in full as of the June 30, 2006 grant date. The exercise price of these options is $5.05 per share. Mr. O’Connor, pursuant to his offer letter, will be entitled to a severance payment equal to his annual base salary and an increase of his annual base salary to $250,000 in connection with a change of control.

No named executive officer exercised options during the year ended June 30, 2007. No awards were made to any named executive officer during such fiscal year under any long-term incentive plan. We do not currently sponsor any defined benefit or actuarial plans.

The following table the outstanding equity awards as of June 30, 2007:

Outstanding Equity Awards at Fiscal Year-End Table


	Option Awards										Stock Awards
															Equity		Equity
															Incentive		Incentive
															Plan		Plan Awards:
					Plan										Awards:		Market or
					Incentive						Number				Number of		Payout
					Plan						of Stock				Unearned		Value of
					Awards:						Shares		Market		Shares,		Unearned
					Number of						or Units		Value of		Units or		Shares,
					Securities						of Stock		Shares		Other		Units or
					Underlying						That		or Units		Rights		Other
	Number of Securities Underlying				Unexercised		Option		Option		Have		of Stock		That		Rights
	Unexercised Options				Unearned		Exercise		Expiration		Not		That Have		Have Not		That Have
Name	Exercisable		Unexercisable		Options		Price		Date		Vested		Not Vested		Vested		Not Vested

Richard J. DePiano		41,480		—		—	$	2.13		8/12/2008		—		—		—		—
Chairman and Chief Executive Officer		45,000		—		—	$	2.38		11/1/2010		—		—		—		—
		50,000		—		—	$	2.77		11/1/2011		—		—		—		—
		10,417		—		—	$	1.45		8/13/2012		—		—		—		—
		25,000		—		—	$	6.94		11/10/2013		—		—		—		—
		25,000		—		—	$	6.19		8/17/2014		—		—		—		—
		40,000		—		—	$	8.06		8/16/2015		—		—		—		—
		7,600		12,400		12,400	$	2.65		11/9/2016		—		—		—		—
Richard J. DePiano, Jr.		700		—		—	$	2.38		11/2/2010		—		—		—		—
Chief Operating Officer and General Counsel		1,100		—		—	$	2.77		11/1/2011		—		—		—		—
		3,567		—		—	$	1.45		8/13/2012		—		—		—		—
		10,000		—		—	$	6.94		11/10/2013		—		—		—		—
		25,000		—		—	$	6.19		8/17/2014		—		—		—		—
		20,000		—		—	$	8.06		8/16/2015		—		—		—		—
		3,000		17,000		17,000	$	2.65		11/9/2016		—		—		—		—
Robert M. O’Connor		60,000		—		—	$	5.05		6/29/2016		—		—		—		—
Chief Financial Officer

The following table shows securities authorized for issuance under equity compensation plans.

Equity Compensation Plan Information

Number of

Securities

Remaining

Available

Number of

for Future

Securities to be

Issuance

Issued Upon

Weighted-Average

Under Equity

Exercise of

Exercise Price of

Compensation

Outstanding

Plans (Excluding

Options, Warrants

Securities

and Rights

Reflected in Column

Plan Category

(a)

(b)

(a))(c)

Equity compensation plans approved by security holders

920,685

5.728

360,667

Equity compensation plans not approved by security holders

120,000

15.60

-0-

Total

1,040,685

360,667

Report of Our Compensation Committee

The following report of our Compensation Committee does not constitute proxy solicitation material and shall not be deemed filed or incorporated by reference into any of our filings under the Securities Act or the Exchange Act, except to the extent that we specifically incorporate this Compensation Committee report by reference therein.

Our Compensation Committee held a telephonic joint meeting with the Board of Directors of the company. The committee reviewed and discussed the compensation discussion and analysis that appears under the caption “Executive Compensation” with management.

Based on the review and discussion by our Compensation Committee with management, the members of our Compensation Committee then held a meeting at which they recommended to our Board of Directors that our Board of Directors approve the inclusion of the compensation disclosure and analysis in our Form 10-K/A annual report for the year ended June 30, 2007 under the caption “Executive Compensation” for filing with the SEC.

Compensation Committee:

Anthony J. Coppola

Lisa A. Napolitano

Fred G. Choate

10/29/07

COMPENSATION OF DIRECTORS

None of our directors were paid any directors fees by us during the fiscal year ended June 30, 2007. Historically, each non-employee director was issued stock options to purchase 10,000 shares of our common stock. This year the Board discussed various alternatives to the issuance of stock options and has charged the Compensation Committee to present a report concerning directors’ fees for the fiscal year ending June 30, 2008. Directors are reimbursed for expenses incurred in connection with attending meetings of the Board and Board Committees.

Director Compensation


									Change in
									Pension Value
									and
	Fees								Nonqualified
	Earned						Non-Stock		Deferred
	or Paid		Stock		Option		Incentive Plan		Compensation		All Other
Name	in Cash		Awards		Awards(1)		Compensation		Earnings		Compensation		Total

William L.G. Kwan	$	—	$	—	$	24,754	$	—	$	—	$	—	$	24,754
Anthony J. Coppola	$	—	$	—	$	24,754	$	—	$	—	$	—	$	24,754
Lisa A. Napolitano	$	—	$	—	$	24,754	$	—	$	—	$	—	$	24,754
Fred G. Choate	$	—	$	—	$	24,754	$	—	$	—	$	—	$	24,754
Richard J. DePiano	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Jay L. Federman, M.D.	$	—	$	—	$	24,754	$	—	$	—	$	—	$	24,754


(1)		The directors stock options, which are exercisable in full as the grant date November 9, 2006 at the closing price on that day of $2.65. The options have a term of ten years from the grant date.

Related Person Transactions

We recognize that related person transactions present a heightened risk of conflicts of interest and can create the appearance of a conflict of interest. Therefore, all proposed related person transactions are disclosed to the Board of Directors before we enter into the transaction, and, if the transaction continues for more than one year, the continuation is reviewed annually by the Board of Directors.

The Company and a member of the Company’s Board of Directors, Jay Federman, M.D., are founding and equal members of Ocular Telehealth Management, LLC (“OTM”). OTM is a diagnostic telemedicine company providing remote examination, diagnosis and management of disorders affecting the human eye. OTM’s initial solution focuses on the diagnosis of diabetic retinopathy by creating access and providing annual dilated retinal examinations for the diabetic population. OTM was founded to harness the latest advances in telecommunications, software and digital imaging in order to create greater access and a more successful disease management for populations that are susceptible to ocular disease. Through June 30, 2007, Escalon had invested $288,000 in OTM and owned 45% of OTM. The members of OTM have agreed to review the operations of OTM after 24 months of operations which began in April 2004, at which time the members each have the right to sell their membership back to OTM at fair market value. Such sale would be subject to OTM’s ability to buy back the membership. The members met in May 2006 and decided to continue the operations of OTM, emphasizing that all additional funding will be provided pro-rata consistent with membership percentage ownership. The Company will provide administrative support functions to OTM. For the years ended 2007, 2006 and 2005 the Company recorded losses of $87,852, $173,844 and $63,613, respectively.

Two relatives of a senior executive officer have provided legal services as either an employee or a consultant to the Company. Richard DePiano, Jr. (son of the Chief Executive Officer (“CEO”)) is Chief Operating Officer and General Counsel to the Company, Mr. DePiano’s salary plus bonus for the fiscal year 2007 was approximately $185,000.

AUDIT AND NON-AUDIT FEES

Our Audit Committee approves the fees and other significant compensation to be paid to our independent public accountants for the purpose of preparing or issuing an audit report or related work. We provide appropriate funding, as determined by our Audit Committee, for payment of fees and other significant compensation to our independent public accountants. Our Audit Committee also preapproves all auditing services and permitted non-audit services, including the fees and terms thereof, to be performed for us by our independent public accountants. The Audit Committee does not delegate its responsibilities to pre-approve services performed by the independent public auditors to management, but may delegate pre-approval authority to one or more of its members. The member or members to whom such authority is delegated is required to report any pre-approval decisions to the Audit Committee at its next scheduled meeting.

Our Audit Committee reviewed and discussed with its current independent public accountants, Mayer Hoffman McCann, the following fees for services rendered for the 2007 fiscal year and considered the compatibility of non-audit services with Mayer Hoffman McCann’s independence. A representative of the Company’s independent public accountants, Mayer Hoffman McCann, is expected to attend the 2007 Annual Meeting. A representative of the Company’s independent public accountants, Mayer Hoffman McCann, will have an opportunity to make a statement and respond to questions at the 2007 Annual Meeting.

Audit Fees. Mayer Hoffman McCann, our independent public accountants, billed us $147,500 and $106,300 in total for the fiscal years ended June 30, 2007 and 2006, respectively in connection with the audit of our annual consolidated financial statements.

Audit Related Fees. We did not pay any audit related fees to Mayer Hoffman McCann during fiscal years ended June 30, 2007 and 2006.

Tax Fees. We did not pay any fees to Mayer Hoffman McCann for tax services during the fiscal years ended June 30, 2007 and 2006.

All Other Fees. We did not pay any fees to Mayer Hoffman McCann for all other services during the fiscal years ended June 30, 2007 and 2006.

Report of the Audit Committee

The following report of our Audit Committee shall not be deemed proxy solicitation material, and shall not be deemed filed with the SEC or incorporated by reference into any of our filings under the Exchange Act or the Securities Act of 1933.

The Audit Committee of our Board of Directors was established in accordance with the Exchange Act and reviews the financial reporting process, including the overview of our financial reports and other financial information we provide to governmental or regulatory bodies, the public and others who rely thereon; our systems of internal accounting and financial controls; the selection, evaluation and retention of our independent public accountants; and the annual independent audit of our financial statements.

Each of our Audit Committee members satisfies the independence requirements of the Exchange Act and Nasdaq rules and complies with the financial literacy requirements thereof. Our Board of Directors has determined that all members of Audit Committee, Anthony J. Coppola, Lisa A. Napolitano and William L.G. Kwan, satisfy the financial expertise requirements and have the requisite experience as defined by the SEC’s rules. Our Board of Directors adopted a written charter for our Audit Committee on May 9, 2000 and amended such charter on July 8, 2004 to comply with new Nasdaq rules. The full text of the Audit Committee Charter as currently in effect is available on our website. Our Audit Committee reviews and reassesses the adequacy of the charter on an annual basis.

Our Audit Committee has reviewed our audited consolidated financial statements and discussed those statements with management. Our Audit Committee has also discussed with Mayer Hoffman McCann our independent public accountants during fiscal 2007, the matters required to be discussed by Statement of Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

Our Audit Committee received from Mayer Hoffman McCann and reviewed the written disclosures required by Independence Standards Board Standard No. 1 (Independence Discussions with Audit Committees) as adopted by the Public Company Accounting Oversight Board in Rule 3200T and discussed with Mayer Hoffman McCann matters relating to its independence. Our Audit Committee also considered the compatibility of the provision of non- audit services by Mayer Hoffman McCann with the maintenance of Mayer Hoffman McCann ’s independence.

On the basis of these reviews and discussions, our Audit Committee recommended to the Board of Directors that our audited consolidated financial statements be included in our Annual Report on Form 10-K for the fiscal year ended June 30, 2007 and be filed with the SEC.

Submitted by:
Audit Committee

Anthony J. Coppola

William L.G. Kwan

Lisa A. Napolitano

November 9, 2007

SHAREHOLDER PROPOSALS

Any shareholder who, in accordance with and subject to the provisions of Rule 14a-8 of the proxy rules of the SEC, wishes to submit a proposal for inclusion in our proxy statement for our 2008 annual meeting of shareholders must deliver such proposal in writing to our Secretary at our principal executive offices at 565 East Swedesford Road, Suite 200, Wayne, PA 19087 no later than August 1, 2008.

Pursuant to Section 2.3 of our Bylaws, if a shareholder wishes to present at our 2008 annual meeting of shareholders (i) a proposal relating to nominations for and election of directors for consideration by the Governance and Nominating Committee of our Board of Directors or (ii) a proposal relating to a matter other than nominations for and election of directors, otherwise than pursuant to Rule 14a-8 of the proxy rules of the SEC, the shareholder must

comply with the provisions relating to shareholder proposals set forth in our Bylaws, which are summarized below. Written notice of any such proposal containing the information required under our Bylaws, as described herein, must be delivered in person, by first class United States mail postage prepaid or by reputable overnight delivery service to the Governance and Nominating Committee in care of our Secretary, for nomination proposals only, or to the attention of our Secretary for all other matters, at our principal executive offices at 565 East Swedesford Road, Suite 200, Wayne, PA 19087 during the period commencing on August 1, 2008 and ending on August 31, 2008.

A written proposal of nomination for a director must set forth:


	•	the name and address of the shareholder who intends to make the nomination (the “Nominating Shareholder”);

	•	the name, age, business address and, if known, residence address of each person so proposed;

	•	the principal occupation or employment of each person so proposed for the past five years;

	•	the number of shares of our capital stock beneficially owned within the meaning of SEC Rule 13d-3 by each person so proposed and the earliest date of acquisition of any such capital stock;

	•	a description of any arrangement or understanding between each person so proposed and the Nominating Shareholder with respect to such person’s proposal for nomination and election as a director and actions to be proposed or taken by such person as a director;

	•	the written consent of each person so proposed to serve as a director if nominated and elected as a director; and

	•	such other information regarding each such person as would be required under the proxy rules of the SEC if proxies were to be solicited for the election as a director of each person so proposed.

Only candidates nominated by shareholders for election as a member of our Board of Directors in accordance with our Bylaw provisions as summarized herein will be eligible for consideration by the Governance and Nominating Committee to be nominated for election as a member of our Board of Directors at our 2008 annual meeting of shareholders, and any candidate not nominated in accordance with such provisions will not be considered or acted upon for election as a director at our 2008 annual meeting of shareholders.

A written proposal relating to a matter other than a nomination for election as a director must set forth information regarding the matter equivalent to the information that would be required under the proxy rules of the SEC if proxies were solicited for shareholder consideration of the matter at a meeting of shareholders. Only shareholder proposals submitted in accordance with the Bylaw provisions summarized above will be eligible for presentation at our 2008 annual meeting of shareholders, and any matter not submitted to our Board of Directors in accordance with such provisions will not be considered or acted upon at our 2008 annual meeting of shareholders.

OTHER MATTERS

Our Board of Directors does not know of any matters to be presented for consideration at our annual meeting other than the matters described in the notice of annual meeting, but if any matters are properly presented, proxies in the enclosed form returned to us will be voted in accordance with the recommendation of our Board of Directors or, in the absence of such a recommendation, in accordance with the judgment of the proxy holder.

By Order of the Board of Directors,

Richard J. DePiano

Chairman and Chief Executive Officer

November 30, 2007

Wayne, Pennsylvania


PROXY		PROXY

ESCALON MEDICAL CORP.
Annual Meeting of Shareholders To Be Held
December 28, 2007

This Proxy is solicited on behalf of the Board of Directors. The undersigned hereby appoints Richard J. DePiano and Robert O’Connor, and each or either of them, the attorneys, agents and proxies of the undersigned, with full powers of substitution (the “Proxies”), to attend and act as Proxy or Proxies of the undersigned at the annual meeting of shareholders (the “Annual Meeting”) of Escalon Medical Corp. (the “Company”) to be held at the offices of Duane Morris LLP, 30 South 17th Street, 12^th Floor, Philadelphia, Pennsylvania, on December 28, 2007 at 9:00 a.m. or any adjournment or continuation thereof, and to vote as specified herein the number of shares which the undersigned, if personally present, would be entitled to vote.

INSTRUCTION: To withhold authority to vote for any individual nominee, strike a line through the nominee’s name on the following list:

Lisa A. Napolitano
Fred G. Choate

THE BOARD OF DIRECTORS RECOMMENDS VOTING FOR EACH OF THE NOMINEES IN PROPOSAL 1.

2. Other Business. In their discretion, the Proxies are authorized to vote upon such other business as may come before the Annual Meeting and any and all adjournments thereof. The Board of Directors at present knows of no other business to be presented by or on behalf of the Company or the Board of Directors at the Annual Meeting.

IMPORTANT — PLEASE SIGN AND DATE ON REVERSE SIDE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

This Proxy when properly executed will be voted as specified. If no instruction is specified with respect to a matter to be acted upon, the shares represented by the Proxy will be voted “FOR” each nominee for Class II Director. If any other business is presented at the meeting, this Proxy confers authority to and shall be voted in accordance with the recommendations of the Board of Directors. This Proxy is solicited on behalf of the Board of Directors and may be revoked prior to its exercise by filing with the Secretary of the Company a duly executed proxy bearing a later date or an instrument revoking this Proxy, or by attending the meeting, requesting that your proxy be revoked and electing to vote in person.

Please sign exactly as name or names appear on this Proxy. If stock is held jointly, each holder should sign. If signing as attorney, trustee, executor, administrator, custodian or corporate officer, please give full title.


		DATE , 2007


		SIGNATURE


		SIGNATURE

		I Do _ I Do Not _ expect to attend the meeting.

PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY
CARD PROMPTLY USING THE ENCLOSED ENVELOPE.

Position

Richard J. DePiano

Chairman and Chief Executive Officer

Richard J. DePiano, Jr.

Chief Operating Officer and General Counsel

Robert M. O’Connor

Chief Financial Officer